Sunday, 31 August 2014
Last updated 1 day ago
Jul 8 2013 | 10:43am ET
Hedge fund Perry Capital has sued the U.S. Treasury Department in a bid to keep it from taking all profits from Fannie Mae and Freddie Mac.
The federal government seized the mortgage lenders in 2008 amidst the financial crisis, injecting $187.5 billion in taxpayer money to keep them afloat. Earlier this year, Treasury amended the terms of the bailout to give it all of the companies' quarterly profits until the bailout is paid back, leading to the biggest dividend in history, $66.3 billion, on June 30.
But according to Perry's lawsuit, which seeks class-action status, the so-called third amendment to the preferred-stock purchase agreement is illegal and threatens to leave shareholders with nothing.
"The third amendment fundamentally and unfairly alters the structure and nature of the securities Treasury purchased," the claim alleges. "This blatant overreach by the federal government to seize all of the companies' profits at the expense of the companies and all of their private investors is unlawful and must be stopped."
Fannie and Freddie shareholders would only be paid after all of the bailout monies had been paid back. Prior to the third amendment, Treasury received fixed dividends of 10% on its stake.
There is currently a bipartisan effort, backed by President Barack Obama, to liquidate both companies, a move that could earn Treasury more than $200 billion in profits over the next 10 years. Perry and other hedge funds, including Paulson & Co., are fighting that effort, urging Congress to allow Fannie and Freddie to become independent once again.
In its third-amendment lawsuit, Perry isn't seeking damages, merely orders barring the government from implementing it. It follows a lawsuit filed by Fannie and Freddie shareholders last month, seeking $41 billion in damages incurred due to the takeover.
Aug 25 2014 | 11:21am ET
As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…
Commodities/Futures magazine launched at the precipice of a revolution in the futures industry—really a revolution in the idea of risk management—that would move it from a small niche industry to ...